China’s economy grew 5.3% in the first quarter of 2024, apparently clearing Beijing’s target of ‘around’ 5%. The headline figure concealed weakness across several parts of the economy.
Manufacturing output dipped 2.1% and retail sales fell by 1.7% in the first quarter of 2024. Industrial production grew below 2% in that period and had remained under 2% growth in recent quarters.
The slowdown extended to housing, where home sales slowed 4.5% in Q2 2024.
Forecasts nonetheless became more optimistic. The International Monetary Fund raised its forecast for China’s 2024 expansion to 5% from 4.6%.
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Goldman Sachs lifted its 2024 forecast to 5% from 4.8% in November. Citi raised its own forecast to 5% from 4.6% in March.
Pressure was also visible in the labour market, where youth unemployment reached 18.9%.
Markets fell before Beijing unveiled its measures. The CSI 300 Index dropped 2.2% in a single day to its lowest level in 13 months on the 28th, while the STAR 50 Index fell 4.1%.
Beijing then introduced its largest stimulus package since September 2024. The People’s Bank of China lowered the interest rate on its Pledged Supplementary Lending facility by 0.25 percentage points to 1.5%.
The authorities expanded re-lending quotas for scientific innovation and technological upgrading by 200 billion yuan. They set additional re-lending limits of 500 billion yuan for agriculture and small-to-medium enterprises, and 300 billion yuan for private enterprises.
Starting October 1, the government will subsidise mortgage interest by 1 percentage point annually for up to 5 years.
The CSI 300 Index rose 0.1% on the day after the package was announced.
The measures have put the focus on whether policy support can restore momentum as Beijing pursues its ‘around’ 5% growth target.
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